The Finance Committee recently discussed how the City deals with delinquent property taxes and what State/City laws dictate when the City can put a lien on a property (see 2/27/2023 Finance Report and NewTV video). Prompted in part by the 91 Newtonville Avenue situation (which has a tax delinquency more than $600K), as reported here and summarized below, the item was docketed to help Councilors understand why the City does not take legal action to collect these delinquent taxes, what triggers a property to move from the multi-year delinquent status to tax lien status, and how to avoid the sort of situation represented by 91 Newtonville Avenue.
City Treasurer Mendes provided an explanation of the process:
- A tax lien is filed against every taxable parcel to guarantee the collection of property taxes.
- Three years and six months after the end of a fiscal year, the tax lien expires and the Treasurer replaces the expired lien with a tax title.
- 16% interest rate is mandated by statute.
- A municipal lien is superior to a mortgage and is superseded only by funds owed to the IRS.
- State law provides municipalities discretion regarding the decision to foreclose.
- A municipality that forecloses “inherits” the property’s liabilities but can sell or use the property as it wishes if taken.
- The last foreclosure was in the 1990s.
According to Chief Financial Officer Maureen Lemieux:
- Only 79% of properties are held in City Tax Title, which accounts for roughly 0.3% of Newton’s total assessed value.
- It has been suggested that the focus of the tax collection efforts should be on the 44 properties on the Tax Title list (and see Tax Title Report) that owe more than $50K and “account for approximately 85% of the money that the City is owed.”
With regard to the 91 Newtonville Avenue property, reference was made to the Massachusetts Attorney General’s Receivership program (which takes receivership of distressed properties, rehabilitates and sells them and returns money back to the owner after costs are recovered). While the cost of the demolition of the 91 Newtonville Avenue property did not make it a good candidate for this program, Treasurer Mendes suggested that a number of other properties on the City’s Tax Title list might be eligible. In addition, City Assessor Jim Shaughnessy explained that the 91 Newtonville Avenue lot is assessed at $610K, but because it is zoned as a duplex, each unit could be sold for about $1.5M and it offers an opportunity for the City to recoup its costs. Treasurer Mendes cautioned that the foreclosure process is complex and would take some time.
The co-docketers expressed interest in meeting with the Treasurer to craft policy solutions to present to the Finance Committee to help standardize the processes for tax liens and foreclosures. Suggestions were made regarding a possible “percentage that could automatically begin the foreclosure process so the city could recoup its lost tax revenue and that the process could be based on property value percentage owed in back taxes” rather than the number of “years delinquent on property taxes.” This might provide the City with a better chance to recover the lost revenue.
Concern was raised regarding a recent Special Permit granted to 967-979 Washington Street and whether it should have been issued when taxes are owed on the property. Committee members suggested adding a property search for delinquent taxes when considering a Special Permit application and that initiation of foreclosure proceedings may help improve the City’s tax collection rate.
Councilor Gentile motioned to hold the item, which passed unanimously.
91 Newtonville Avenue
The City’s Finance Committee reviewed a request for $174,000 for the demolition of the property located at 91 Newtonville Avenue, at its November 28, 2022 meeting. It held the item because no one from the City’s Inspectional Services Department was on hand to provide specifics regarding the case to the Committee. Chief Financial Officer Maureen Lemieux stated that the Committee had already approved $220,000 for the project but due to the presence of hazardous materials inside the building, an additional $190,000 was incurred. She said that “the City was requesting the $175,000 because the existing demolition account had enough money to cover the rest of the cost” and added that the City may not recoup the total amount of money the City lost on the property between unpaid property taxes and demolition costs but that the site still needed to be made safe. Concern was expressed because the work had been done and the money already committed, and CFO Lemieux confirmed that “this money did not go through the proper procedure, so the vendor proceeded at their own risk, and that the only thing committing the City to this spending is the City of Newton’s good name.” She added that this could have been deemed unsafe, allowing for the ISD Commissioner to move forward with the work as an emergency, which is permitted under state law. Since the Commissioner was not present, the Committee held the item.
The Committee approved this funding request at its December 12, 2022 meeting (see NewTV video). This time the Commissioner of Inspectional Services, John Lojek, was present and said that there was a “large, unstable structure in an exceptionally difficult location.” He said an emergency committee (Lojek, Fire Chief Gentile, a structural engineer, and DPW Commissioner McGonagle) determined that the building was unsafe, too dangerous to enter and evaluate whether hazardous materials were present, and had to come down — and that DEP required that the building be disposed of as if it were hazardous materials. (NOTE: The Commissioner reported that 17 truckloads were needed, at $9,650/truckload, to dispose of the material properly.) The Commissioner added that the public safety and convenience of abutters made it “crucial” to continue the project as quickly as possible and “could not stop” the project “to wait for more funding.” He later added that this was the second building he had to demolish in 18 years. Initially, CFO Lemieux believed the funds were from Free Cash, but Comptroller Steve Curley said the funds were transferred from the Library Full-Time Salaries Account on June 21, 2022.
Due to concerns regarding the taxes owed on this property, a Councilor reported that an item was filed to discuss how to intervene and prevent a tax bill of this size from being incurred in the future, as well as to understand protocols in place in the City with respect to abandoned properties.
Prior to the Committee vote, CFO Lemieux suggested that if the funding request was not approved, cuts would be made to other departments or projects if necessary, and she suggested at a policy should be in place in the future. The Committee voted to approve the item 8-0.
